We are currently in the process of refinancing our home. We signed all the paperwork yesterday. Today I applied for a department store credit card (the only one in my life I have ever applied for, I only use my AMEX or Visa) and was denied. I know we have good credit (in the low 700 range for both my husband and me) so I was shocked to be declined. Could the current refinancing have caused me to be declined?
Thank you for your question about refinancing a loan, how it could affect your credit score, and your being turned down for a credit card that you applied for.
First of all, when you are turned down for credit, you are entitled to receive a free copy of your credit report. I think it is important that you get a copy and see for yourself what your credit score is. I understand that you just completed a loan and have likely seen with your own eyes that your credit is in good standing. Still, without examining the report, it will not be clear if your score has dropped or to figure out what steps you may need to take.
Remember, credit reports often contain faulty information. According to a 2004 Federal Reserve Board report, 79 percent of credit reports may contain some type of error and that about 25 percent of all consumer credit reports may contain errors that can result in the denial of access to credit.
The Fair Credit Reporting Act (FCRA), a federal law, requires consumer credit reporting companies to report accurate information. If you find any inaccurate information in your credit report, you should dispute the credit report listing with the bureau in question.
Reading your question, a few other questions came to mind. Did you have many people pull your credit recently, perhaps when you were shopping around for the best loan? Aside from the store credit card, have you applied for any other credit cards recently or shopped for financing on a car loan? Having a large number of credit inquiries in a short period of time will lower your score. The drop in your score from this is not usually very high and your score improves once the inquiries are not so recent.
Did you increase the loan amount, when comparing the new loan and the one that you refinanced? If you did a cash-out refinance and increased your overall indebtedness, then you could certainly have caused a negative effect on your credit score. The larger the loan you took out, in comparison to the loan your refinanced, the greater the negative impact on your score.
When you review your credit report, if you find that you need or want to boost your score, here is an excellent resource that will help you raise your credit score for free.
One final thought. Each credit card issuer has its own policies and benchmarks in determining to whom it will grant credit. It may have a policy, as ridiculous as it may be, to deny credit to anyone who has bought a house or refinanced within the last X months because, according to its historical studies, those debtors are at a greater risk for default. I am speculating, of course, because I do not represent the card issuer. My point is that the days of easy credit are over; all creditors are screening potential customers carefully. Perhaps the creditor in question is erring on the side of screening potential customers a little too carefully.
I hope this information helps you Find. Learn & Save.